To read this content please select one of the options below:

Silence is golden? – Analysing the transparency of ESG controversies in corporate reporting within the pharmaceutical and textile industry

Sophia M. Schwoy (Chair of Management, Accounting and Corporate Governance, Faculty III School of Economic Disciplines, University of Siegen, Siegen, Germany) (School of Business and Economics, Institute of Accounting and Taxation, University of Münster, Münster, Germany)
Andreas Dutzi (Chair of Management, Accounting and Corporate Governance, Faculty III School of Economic Disciplines, University of Siegen, Siegen, Germany)
Juliane Messing (Faculty III School of Economic Disciplines, University of Siegen, Siegen, Germany)

Management Decision

ISSN: 0025-1747

Article publication date: 26 August 2024

332

Abstract

Purpose

The aim of this study is to critically examine the transparency and reporting practice of Environmental, Social, and Governance (ESG) controversies within the pharmaceutical and textile industry. Based on the four core dimensions of transparency, we explore which reporting medium is most frequently chosen for the disclosure of negative ESG contributions, the nature and information content of the disclosed incidents and how voluntary adherence to sustainability reporting standards and independent assurances affect the reporting.

Design/methodology/approach

We use conceptual content analysis and employ a counter-accounting approach to analyse the disclosure of 190 ESG controversies in 104 corporate reports from the pharmaceutical and textile industries, covering a three-year period from 2018–2020.

Findings

The very large majority of controversies are reported only once in the legal proceedings section of the annual report, but not again in the sustainability report, where it would be necessary to provide a balanced picture. Moreover, companies tend to disclose only those controversies that are either associated with high media attention or are expected to be related to litigation, resulting in 26 per cent of controversies not being disclosed at all. The overall quality of disclosure is unsatisfactory and in need of improvement, but comparably higher in the pharmaceutical industry than in the textile industry. Interestingly, neither the application of sustainability reporting standards nor independent assurance seems to positively impact the disclosure behaviour.

Originality/value

Our paper provides new insights into the shortcomings of current ESG controversy disclosures by revealing patterns of selective reporting practices and the strategic framing of issues. In addition, it contributes to the debates on corporate cherry-picking in the adoption of sustainability reporting guidelines and on the effectiveness of external assurance of sustainability reports. Based on the findings, it offers important implications for practitioners, in particular management, policy makers, rating agencies and assurance providers.

Keywords

Acknowledgements

We would like to thank the editor-in-chief, guest editors, and reviewers for their valuable comments and constructive suggestions, which helped us to significantly improve the paper. Furthermore, we thank participants of the Management Decision Annual Conference (2023) and the European Academy of Management Conference (2023) in Dublin and the British Academy of Management Conference (2023) in Brighton for their insightful comments on our research.

Author contribution statement: Sophia M. Schwoy: Conceptualization, Methodology, Investigation – Coding, Data Curation, Formal Analysis, Visualization, Writing – Original Draft, Review and Editing, Andreas Dutzi: Review, Juliane Messing: Investigation – Coding.

Citation

Schwoy, S.M., Dutzi, A. and Messing, J. (2024), "Silence is golden? – Analysing the transparency of ESG controversies in corporate reporting within the pharmaceutical and textile industry", Management Decision, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/MD-10-2023-1988

Publisher

:

Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

Related articles